Hail Mary! A Safe Choice, or Diligent SEC Enforcer?

Mary Schapiro, President Barack Obama's pick to lead the beleaguered U.S. Securities and Exchange Commission, was confirmed as SEC Chairman yesterday, after having undergone only a mild grilling before the Senate Banking Committee.

Of course, the biggest question, and one only time may hold the answer to, is this: Which Mary Schapiro will ultimately chair the SEC? Will it be Mary, the affable bureaucrat, or Mary, the diligent enforcer? Few of President Obama's picks have two so sharply drawn opposing personas — at least in the eyes of the press, which, given the recent duality of opinion around Schapiro, might lead some to suspect that President Obama's SEC pick has a body double.

To date, her resume seems to offer as much supporting evidence for those who argue that she'll be a light touch regulator as it does for those who think that she'll become an aggressive enforcer.

“Obama's SEC Pick Is No Joe Kennedy” read one Washington Post headline. The Post article's thrust was that the SEC would be better served by having a leader who was “a politically ambitious bootlegger and dealmaker” rather than a safe choice bureaucrat who may hesitate to wield a bully club.

Meanwhile, Floyd Norris of The New York Times wrote: “In picking Ms. Schapiro, Mr. Obama has chosen someone who knows all of the issues and all of the players and who is committed to effective and rational regulation.”

While it may be too early to say just which Mary Schapiro will chair the SEC, one subject addressed at the January 15 hearing may have tipped the hand of the veteran regulator. When it came to the subject of IFRS (International Financial Reporting Standards), Schapiro made it clear to the Senate Banking Committee that she would not be bound to the road map proposed by Christopher Cox, the former chairman, who last summer began snipping the timeline for IFRS adoption.

Although the new era of global accounting is arguably unstoppable, Schapiro seems intent on slowing down what certain regulators have described as Cox's runaway train. There is no doubt that the financial crisis is giving certain U.S. regulators pause, as they trace the root causes of the crash to a zealous belief that market discipline — and not the enforcement of rules and standards — can best limit risk.

For its part, IFRS promises to replace U.S. GAAP's 25,000 pages of standards with a streamlined 2,500 pages of standards. The timing behind the rush to IFRS suddenly seems oddly misplaced in light of the continuing financial crisis (think of John Lennon getting a buzz cut at the peak of Beatlemania). The present crisis is arguably a welcome mat for those who envision a more rules-based regime.

“We didn't accumulate the massive volumes of pages in GAAP for no reason — we acquired them over time due to cracks in the system that required more stringent rules. Switching to IFRS is like coming up with a whole bunch of rules for your 5-year- old and then all of a sudden giving him the keys to your car and telling him to do whatever he wants,” one New York Times reader recently commented.

Just which Mary Schapiro will lead the SEC? When it comes to IFRS, time will tell.